Abstract. Along with the rapid development of China"s securities market, the criminal behaviors of insider trading occur frequently. All these behaviors of insider trading force China"s securities market to suffer from a seriously heavy blow, and also give rise to the disorder dealing in securities and the chaos in the securities market, seriously damaging the legitimate interests of companies and investors. Therefore, only the necessity for the determination of the crime of insider trading is clearly recognized, the constitutive elements of the crime of insider trading is known well, a clear distinction between inside trading and short-swing trading, between crime and non-crime, or between the crime of insider trading and the crime of breaching of inside information is drawn can the laws be accurately applied, the crime of insider trading be punished, and the normal order of the socialist market economy can be accurately maintained.
Key words: Crime of Insider Trading; Determination of Crime; Investigation Strategies
1.Crime of Insider Trading
Insider trading is named as the trading between insider people in the United States and the United Kingdom, and interior wiring trading in Taiwan, etc. In the article 180 of China"s Criminal Law, it is prescribed that people who have inside information on securities trading illegally obtain inside information on securities trading, or buy or sell securities or leak relevant information prior to the release of information that could have a major effect on the issuance and trading of the securities concerned or on the price of other securities shall be sentenced to not more than five years in prison or criminal detention, provided the circumstances are serious.
Seen from international practice, the insider trading behaviors on securities actually include trading, leaking and suggesting. In China"s Securities Law, it is clearly prescribed that suggesting is also included in insider trading on securities. However, in China"s Criminal Law, only leaking and suggesting are prescribed. Therefore, from the perspective of improving legislation, the author thinks that the behavior of suggesting others to buy or sell the securities should be prescribed in China"s Criminal Law.
2.Several Problems in the Determination of the Crime of Insider Trading
It is necessary to attach importance to the several problems in the determination of the crime of insider trading, as shown below.
2.1. Paying attention to the determination of insider information
The watershed to divide the insider information and non-insider information is whether the information is disclosed to the public. Therefore, insider information has to be undisclosed. However, how do people grasp the standards for disclosed information? In this paper, the author thinks that it is necessary to give consideration to the values of information comprehensively, the effect on securities market, the ways of disclosing information, the popularity of company among investors, and the time for the common investors to acquire the information, etc. Then, case analysis method can be use to determine that the same time after information disclosure should be used as demarcation for the standards of information disclosure.
2.2. Paying attention to the determination whether insider information is known by actor
Actors who do not know the insider information truly, and make analysis and prediction using the disclosed information, materials and their own learnt, and wisdom, but present personal points of views, buy or sell securities, or deal in futures related to the insider information before the insider information is made known shall not be determined to commit the crime of insider trading.
2.3. Paying attention to the differences between the crime of insider trading and the crime of disclosing insider information
There are two different objective behavioral patterns, subjective respects and social consequences between the crime of insider trading and the crime of disclosing insider information. The determination of different crimes shall be made if the crimes accord with the constitutive elements of the two crimes. People who know the insider information and suggest other people to buy or sell securities using the acquired insider information shall be determined to commit the crime of disclosing the insider information if other people subjectively know the provided information is from insider and also are fully aware it is illegal to buy or sell securities using the insider information, and also the actors are determined to commit the crime of insider trading if buying or selling securities using the insider information.
2.4.Determination of the nature of insider trading behaviors in merger of corporations
It is also necessary to clarify several problems in the investigation and determination of the crime of insider information, as shown in the following.
First, it is the problem about companies to participate in buying or selling their securities. In the security community of China, it is called as the "repurchase of banker". However, some counties prescribe that companies are not permitted to repurchase the securities before the investors at market have not acquired the disclosed information in time, but also shall guarantee that the price sensitivity information related to company affairs have been fully disclosed to the public, and otherwise will be handled in accordance with insider trading.
Second, it is the problem about whether there are limitations on the trading activities of the merger bidders or not. Obviously, before the merger information is released, all conditions of the merged companies have been mastered fully by the bidders. However, it is necessary for the bidders to do what they can do if intending to take a tiny space in the shares of the merged companies, aiming at standing up equally with the original company shareholders, which are in an advantageous position. Therefore, this kind of activities is allowable for the bidders in some countries, but it is definitely necessary for them to fully disclose their share holding conditions. However, this kind of disclosure does not require the bidders to disclose the merging willingness of the future to market.
In above problems, there have been no explicit provisions in the judicial interpretation of China. Therefore, the author suggests that the matured experience of the above countries can be introduced to handle these problems.
2.5.Relationship between Insider Trading and Short-swing Trading
First, short-swing trading is defined as the behavior of the insiders of companies to buy or sell company stocks for profit-making in a period after stocks are hold by them. The short-swing trading is a behavior breaking the laws.
Second, the principle of liability without fault is adopted for short-swing trading. The principle of faulty liability, however, is adopted for the insider trading.
Third, short-swing trading refers to a prior prevention mechanism. However, the insider trading is premised by the condition that the insider information is used by the actors.
3.Investigation Strategies of Insider Trading Cases
3.1.Investigation methods
In the investigations of the insider trading cases, it is necessary to start from the relationship between the persons involved in the cases and the insiders in accordance with the different sources of the case clues.
3.1.1 Forward investigation
The criminal suspects can be searched starting from the investigations on the insiders and their relationship with the suspects. In the crimes of insider trading, the insider information is generally first known by the legal insiders. Therefore, the criminal ways of these insiders can be classified into two types: (1) a large amount of securities are bought or sold with the names of themselves, spouses or children before the insider information is disclosed to the public, aiming at making profits or avoiding risks; (2) other people such relatives and colleagues are told to share the insider information, and hence are allowed or suggested to buy or sell securities. It is the most fundamental method to find the suspects from the investigations on the legal insiders and their relationship with the suspects. However, because the range of the investigations is wide, it is possible for the investigations to take a lot of time and energy, making the result not always to be ideal. Therefore, in practice, it is also necessary to select other kinds of methods to carry out investigations with focuses.
3.1.2 Backward investigation
The criminal suspects can be discovered from the investigations on the records of securities trading. If there are the behaviors regarding insider trading, it is necessary for the investigators in the investigation process to first confirm the specific time range for the occurrence of the abnormal functions of stock prices, and then recognize the specific persons involved in the trading as well as the securities companies they entrust to trade according to the securities code cards numbers of the related participants in the securities trading records. Then, the related securities companies can be required to provide a list of clients involved in the trading. Finally, the listed companies can be required to provide a list of personnel who know the insider information before the information is disclosed to the public.
3.1.3 Clue-oriented investigation
According to the reported clues, the security companies are investigated directly. The investigators can directly go to the related security companies and examine the records regarding to securities trading, aiming at acquiring the evidences for the implementation of the insider trading by the criminal suspects. Then, this can be utilized as a breakthrough to carry out a further investigation or interrogation on the suspects, striving to track down the criminal cases completely at one fell swoop.
3.1.4 Peripheral investigation
The investigations can be implemented through other feasible ways. The securities market is an information collecting and distributing centre, which is fully filled with all kinds of information. Therefore, it is difficult to tell the true from the false. For example, the securities exchange centers and websites are full of all kinds of rumors, but unfortunately some of them turn out facts.
3.2.Key points in investigations
3.2.1 Inquiring insiders to know the cases
In the cases of insider trading, the related insiders comprise of all the inside personnel knowing the insider information, the general investors, the people knowing the unknown backgrounds of the investors, and the related brokers, accountants, lawyers, bank personnel, etc. According to this characteristic, it is necessary for the investigators to accurately grasp the mental state of each insider, attaching importance to the strategy of psychological inquiry.
3.2.2 Interrogating the criminal suspects and making a thorough investigation of the whole case
It is necessary for the investigators to lay a stress on the following five aspects when interrogating the criminal suspects: (1) the criminal suspects as well as their accomplices; (2) the ways for the criminal suspects to know the insider information; (3) the process details such as time, place and means for the criminal suspects to implement the behaviors of leaking, suggesting and trading; (4) the types, amount and prices of the bought or sold securities each time, the amount of the acquired illegal interests or avoided loss, and the amount of the "benefits" the insiders demand or gain from the trading, etc; (5) the deposits, account names, account numbers, passwords and amounts in financial institutions.
3.2.3 Searching, detaining and freezing the properties involved in the cases
It is necessary for the investigators to carry out a search on the dwelling places and offices of the criminal suspects. The properties of the criminal suspects should be detained in time once the documentary evidences, illicit money and bribes related to the insider trading cases are discovered. In the mean time, it is necessary for investigators to inquire the related asset accounts of the criminal suspects in time, and also freeze their relevant accounts for the purpose of preventing the suspects from transferring illicit money.
3.2.4 Retrieving evidences and improving the evidence system
In the cases of insider trading, the information related to the insider trading, such as individual"s name, unit name and address, time of opening the accounts, brokers, the time, types, quantities and profit making of insider trading, is recorded in the computers of all securities exchange centers or companies.
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